1
FORM 10-QUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(MARK ONE)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the period ended March 29,June 21, 1997
--------------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from ____________ to -------------- -------------__________.
Commission file number 0-10716
CALIBER SYSTEM, INC.
- ----------------------------------------------------------------------------------------------------
(Exact name of company as specified in its charter)
Ohio 34-1365496
- ------------------------------- --------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3925 Embassy Parkway, P.O. Box 5459, Akron, Ohio 44334-0459
- ------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code is (330) 665-5646
Indicate by check mark whether the company (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
-- ------
The number of shares of common stock without par value outstanding as of April
26,July
19, 1997 was 38,925,549.
-1-38,935,452.
- 1-
2
INDEX
CALIBER SYSTEM, INC.
FORM 10-Q
PERIOD ENDED MARCH 29,JUNE 21, 1997
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets--March 29,Sheets--June 21, 1997 and
December 31, 1996
Condensed Consolidated Statements of Income--Twelve
weeks and twenty-four weeks ended March 29,June 21, 1997 and
March 23,June 15, 1996
Condensed Consolidated Statements of Cash
Flows--TwelveFlows--Twenty-four weeks ended March 29,June 21, 1997 and March 23,June
15, 1996
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION
- ---------------------------
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
- ----------
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PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
CALIBER SYSTEM, INC.
ASSETS MARCH 29,JUNE 21, DECEMBER 31,
1997 1996
---------- --------------------- ---------
(dollars in thousands)
CURRENT ASSETS
Cash and cash equivalents $ 42,97323,148 $ 38,829
Accounts receivable 341,779302,280 365,033
Prepaid expenses and supplies 67,78959,659 72,813
Deferred income taxes 80,69968,960 47,801
---------- ----------
TOTAL CURRENT ASSETS 533,240454,047 524,476
PROPERTY AND EQUIPMENT, NET 841,575819,283 848,319
Cost in excess of net assets of businesses
acquired, net of amortization 4,9744,933 5,015
Other assets 48,49645,764 54,357
---------- ----------
TOTAL OTHER ASSETS 53,47050,697 59,372
---------- ----------
TOTAL ASSETS $1,428,285$1,324,027 $1,432,167
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 215,000115,000 $ 230,000
Accounts payable 342,094337,051 262,313
Salaries and wages 65,73857,742 80,259
Other current liabilities 58,77355,897 57,469
---------- ----------
TOTAL CURRENT LIABILITIES 681,605565,690 630,041
LONG-TERM LIABILITIES
Long-term debt 200,000 200,000
Self-insurance accruals 40,96941,299 40,809
Deferred income taxes 24,64526,174 22,670
---------- ----------
TOTAL LONG-TERM LIABILITIES 265,614267,473 263,479
SHAREHOLDERS' EQUITY
Serial preferred stock - without par value:
Authorized - 40,000,000 shares; Issued - none -- --
Common stock - without par value:
Authorized - 200,000,000 shares; Issued - 40,896,414 shares 39,898 39,898
Additional capital 51,16151,243 50,735
Retained earnings 447,284456,975 503,496
---------- ----------
538,343548,116 594,129
LessTreasury stock, at cost of common stock in treasury
(1997 - 1,689,0001,687,000 shares, 1996 - 1,605,000 shares) 57,27757,252 55,482
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 481,066490,864 538,647
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,428,285$1,324,027 $1,432,167
========== ==========
See notes to condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
CALIBER SYSTEM, INC.
TWELVE WEEKS ENDED TWENTY-FOUR WEEKS ENDED
(SECOND QUARTER) (FIRST QUARTER)
------------------------
MARCH 29, MARCH 23,HALF)
--------------------------- ---------------------------
JUNE 21, JUNE 15, JUNE 21, JUNE 15,
1997 1996 --------- ---------1997 1996
----------- ----------- ----------- -----------
(dollars in thousands, except per share data)
REVENUE $ 641,196574,676 $ 582,074615,901 $ 1,215,872 $ 1,197,975
OPERATING EXPENSES
Salaries, wages and benefits 247,426 230,023204,700 241,010 452,126 471,033
Purchased transportation 189,710 166,491185,453 181,332 375,163 347,823
Operating supplies and expenses 129,158 110,795109,933 131,535 239,091 242,330
Operating taxes and licenses 13,486 12,04310,775 13,426 24,261 25,469
Insurance and claims 17,920 11,19410,917 13,848 28,837 25,042
Provision for depreciation 29,970 33,34727,938 33,336 57,908 66,683
Restructuring charge - - 85,000 --
--------- ----------
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 712,670 563,893
--------- ---------549,716 614,487 1,262,386 1,178,380
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (71,474) 18,18124,960 1,414 (46,514) 19,595
Other expense, net (125) (1,232)
--------- ---------(2,403) (1,370) (2,528) (2,602)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (71,599) 16,94922,557 44 (49,042) 16,993
Income tax provision (benefit) provision (22,375) 7,328
--------- ---------8,972 (176) (13,403) 7,152
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (49,224)13,585 $ 9,621
========= =========220 $ (35,639) $ 9,841
=========== =========== =========== ===========
EARNINGS (LOSS) PER SHARE $ (1.25)0.34 $ 0.24
========= =========0.01 $ (0.91) $ 0.25
=========== =========== =========== ===========
DIVIDENDS DECLARED PER SHARE $ 0.10 $ 0.18 $ 0.18
========= =========0.28 $ 0.36
=========== =========== =========== ===========
AVERAGE SHARES OUTSTANDING 39,247 39,505
========= =========39,208 39,525 39,228 39,515
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
CALIBER SYSTEM, INC.
TWELVE WEEKS ENDED
(FIRST QUARTER)Twenty-Four Weeks Ended
(First Half)
-------------------------
MARCH 29, MARCH 23,June 21, June 15,
1997 1996
----------- ---------------------- ----------
(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
IncomeNet income (loss) from continuing operations $(49,224) $ 9,621(35,639) $ 9,841
Restructuring charge 85,000 ---
Other adjustments 2,614 (6,601)
-------- --------76,854 32,651
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 38,390 3,020126,215 42,492
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (25,385) (37,830)(49,665) (126,769)
Sales of property and equipment 2,159 3,33120,793 4,345
Proceeds from sale of investment 10,993 --15,995 -
Net advances to discontinued operations -- (14,277)
-------- --------- (10,227)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (12,233) (48,776)(12,877) (132,651)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (7,013) (13,671)(14,019) (20,725)
Increase (decrease) in short-term debt, net (15,000) 37,900
-------- --------(115,000) 87,200
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (22,013) 24,229
-------- --------(129,019) 66,475
--------- ---------
CASH FLOWS PROVIDED BY (USED IN)USED IN CONTINUING OPERATIONS 4,144 (21,527)(15,681) (23,684)
CASH FLOWS PROVIDED BYUSED IN DISCONTINUED OPERATIONS -- 932
-------- --------- (3,102)
--------- ---------
NET INCREASE (DECREASE)DECREASE IN CASH AND CASH EQUIVALENTS 4,144 (20,595)
-------- --------(15,681) (26,786)
--------- ---------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $ 38,829 $ 34,908
-------- ----------------- ---------
CASH AND CASH EQUIVALENTS AT END OF FIRSTSECOND QUARTER $ 42,97323,148 $ 14,313
======== ========8,122
========= =========
See notes to condensed consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CALIBER SYSTEM, INC.
Note A - Basis of Presentation
- ------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the twelvetwenty-four weeks ended March 29,June 21, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share, which is required to be retroactively adopted on
December 31, 1997 with all prior periods being restated. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. This statement iswill not expected to change earnings per
share as reported for the quarter or first half ended March 29,June 21, 1997.
For further information, refer to consolidated financial statements and
footnotes thereto included in the company's annual report on Form 10-K for the
year ended December 31, 1996.
Note B - Viking Restructuring
- -----------------------------
On March 27, 1997, the CompanyThe company announced a major restructuring of Viking's operations on March 27,
1997, which included terminating operations at its Viking
Freight, Inc. subsidiary. Under the plan, Viking will continue to operateformer Coles Express unit in
the 12 western states where it has been a leaderNortheast and Spartan Express in the regional less-than-truckload
market for many years. An agreement in principle was reached on April 30, 1997
to sell Viking's southwestern division (formerly Central Freight Lines Inc.).Southeast and Midwest. Operations at
Viking's midwestern, eastern and northeasternthese divisions (formerly
Spartan Express, Inc. and Coles Express, Inc.) ceased on March 27, 1997. In connection with the Viking
restructuring, the Companycompany recorded in 1996 a non-cash $225 million ($175 million net of tax) or $4.43 per share asset
impairment charge inrelated to the fourthwrite-down of goodwill of $82 million and
property and equipment of $143 million. First quarter 1997 results included a
restructuring charge of 1996 and an $85 million ($56.4for employee-related costs, including
severance and benefits, costs related to lease terminations, additional non -
cash asset impairments and other expenses resulting from the restructuring.
Subsequent to the end of the second quarter, the company finalized the sale of
Viking's Southwestern Division, which is now operating under the name Central
Freight Lines, Inc. Caliber received $43 million netin cash, retained certain
properties that will be sold at a later date, and transferred approximately $22
million in liabilities to Central Freight Lines, Inc. The total value of tax) or
$1.43 per share restructuring charge inthis
transaction, including the first quarter of 1997.anticipated proceeds from the retained properties, is
estimated at approximately $80 million. This transaction is not anticipated to
materially impact earnings.
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Note B - Viking Restructuring (continued)
- -----------------------------------------
The major componentsResults of operations at the former Coles, Spartan, and Southwestern Division
from the beginning of the restructuring charges on a pre-tax basisquarter until shut down or sale of operations are
as
follows:
(dollarsincluded in thousands)
Long-Lived Other
Asset Restructuring
Impairment Costs Total
----------- ----------- ---------
Asset impairment (non-cash) $ 225,000 $ 27,100 $ 252,100
Future lease costs and other contractual obligations - 32,000 32,000
Employee severance and other benefits - 21,500 21,500
Other exit costs - 4,400 4,400
---------- ---------- ----------
Total $ 225,000 $ 85,000 $ 310,000
========== ========== ==========
The long-lived asset impairment charge resulted from the Company's assessmentconsolidated second quarter results. Revenue associated with
these divisions was $49.9 million, expenses were $66 million, resulting in $16.1
million of transition costs attributable to operating losses at the former
Southwestern Division and to other non-recurring costs related to the closing of
the ongoing value of propertyformer Coles and equipment (primarily real estate and revenue
equipment) used in Viking's operations which was determined to be impaired under
SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. Accordingly, these assets were written-down to fair
value in the Company's 1996 financial statements. Fair value was based on
estimates of appraised values for real estate and quoted prices for equipment.
Expenses for employee severance relate to the elimination of 4,000 employee
positions primarily at operating terminals being closed in the restructuring.
Following is a summary of the long-lived asset values as of December 31, 1996
related to Viking and the adjustments recognized in the 1996 financial
statements to reflect the impairment of these assets.
(dollars in thousands)
Carrying Value Impairment Fair Value
-------------- ---------- -----------
Property and equipment:
To be held and used $207,000 $ 65,000 $142,000
To be disposed of 188,000 78,000 110,000
Intangible assets 82,000 82,000 -
-------- -------- --------
Total $477,000 $225,000 $252,000
======== ======== ========
Spartan divisions.
Assets held for sale from the restructuring are included in property and
equipment in the accompanying condensed consolidated balance sheet. The accrued
restructuring costs are included in accounts payable. The Company expects to
completeIn the
second quarter, the company received $16.2 million from the sale of the assets to be disposed of ($110,000)certain
Viking property and incur
substantially all cash expenses ($57,900)equipment, and paid $13.2 million primarily in severance and
related costs associated with the restructuring
during 1997.
Results of operations associated with the assets held for disposal are included
in Viking's operating results for the first quarter of 1997. Total revenues for
Viking for this period were $201.1 million and total operating loss was $33.1
million, excluding the restructuring charge.
-7-
8restructuring.
Note C - Deferred Income Taxes
- ------------------------------
Net deferred tax assets were $56increased to $43 million at March 29,June 21, 1997 andfrom $25
million at December 31, 1996, reflecting the tax effects of the restructuring
charge. The Companycompany has determined that no valuation allowance is required on
net deferred tax assets based on the ability to recover taxes previously paid.
Note D - Accounting Period
- --------------------------
The company operates on a 13 four-week period calendar with 12 weeks in each of
the first three quarters and 16 weeks in the fourth quarter.
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Item 2. Management's Discussion and Analysis of Financial Condition
- --------------------------------------------------------------------
and Results of Operations
-------------------------
Consolidated revenue for the firstsecond quarter ended June 21, 1997 decreased 6.7%
to $574.7 million over second quarter 1996 revenue of $615.9 million as a
result of the Viking restructuring announced on March 29, 1997 amounted27, 1997. Excluding
Viking, revenue increased 14% for the quarter, from $389.6 million in 1996 to
$641.2$443.4 million in 1997. For the twenty-four weeks constituting the company's
first half, consolidated revenue was $1,215.9 million, an increase of $59.1$17.9
million or 10%1.5% from $1,198.0 million for the first half of 1996. First half
revenues excluding Viking amounted to $883.5 million for 1997, a 16.2% increase
over comparable 1996 first half revenues of $760.4 million. First half 1997
revenues benefited from three more shipping days than first half 1996.
All business units except Viking experienced revenue improvements over second
quarter 1996 revenuelevels. The general strength of $582.1 million. Excluding Viking Freight, the company's restructured
regional carrier in the West, revenues amountedeconomy has contributed to
$440.1 million, an increase
of 19%.increased demand for transportation services. Revenue at RPS, the company's
small-packagesmall package carrier, amountedincreased to $339.1$338.7 million for the firstor 12.0% over second quarter
revenue of 1997 as compared to 1996 first quarter revenues of
$287.7$302.5 million an 18% increase. 1997 revenues benefited from three ( 5% ) more
shipping days, mild winter weather and a strong retail environment.last year. Package volume was significantly higher thanincreased 13% over last
year; however, a continuing,
aggressive pricing environment, lower package weights and a greater percentage of overnight
ground packages in RPS's mix reduced revenue yields. Rates remain
relatively flat yearyields even though indexed rates
were up slightly over year despite the February rate increase.last year. On-time service at RPS continues to run at
record levels and approximates 96%. GrowthSecond quarter net revenues at Caliber
Logistics, contributed significantly to the overall increase in revenue
during the first quarter. First quarter net revenues, which are included in consolidated revenues, increased 38%34%, while
gross revenues increased 54%35%. RobertsRoberts' Express, the company's expedited carrier,
reported revenue growth of 4%6% over the firstsecond quarter last year.
Viking's first quarter revenue decreased by 5% to $201.1 million in 1997 from
$211.3 million in 1996.
The company announced a major restructuring of Viking's operations on March 27,
1997, which included terminating operations at its former Coles Express unit in
the Northeast and Spartan Express in the Southeast and Midwest. Further, the company has signed an agreement in principle to sell the
former Central Freight Lines, which serves customers in the Southwest. As a result of
thisthe Viking restructuring, the company recorded in 1996 a non-cash $225 million
asset impairment charge related to the write-down of goodwill of $82 million and
property and equipment of $143 million. First quarter 1997 results includeincluded a
restructuring charge of $85 million for employee-related costs, including
severance and benefits, costs related to lease terminations, non-cashadditional non -
cash asset impairments and other expenses resulting from the restructuring.
The
Company expects to completeIn the second quarter, the company received $16.2 million from the sale of
the assets to be disposed of ($110,000)certain Viking property and incur substantially all cash expenses ($57,900)equipment and paid $13.2 million primarily in
severance and related costs associated with the restructuring during 1997. Vikingrestructuring.
Subsequent to the end of the second quarter, the company finalized the sale of
Viking's Southwestern Division, which is now providesoperating under the name Central
Freight Lines, Inc. Caliber received $43 million in cash, retained certain
properties that will be sold at a later date, and transferred approximately $22
million in liabilities to Central Freight Lines, Inc. The total value of this
transaction, including the anticipated proceeds from the retained properties, is
estimated at approximately $80 million. This transaction is not anticipated to
materially impact earnings.
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Results of operations at the former Coles, Spartan, and Southwestern Division
from the beginning of the quarter until shut down or sale of operations are
included in the consolidated second quarter results. Revenue associated with
these divisions was $49.9 million, expenses were $66 million, resulting in $16.1
million of transition costs attributable to operating losses at the former
Southwestern Division and to other non-recurring costs related to the closing of
the former Coles and Spartan Divisions.
Viking's ongoing operations now provide regional freight service to customers in
12 western states through 43 terminals. -8-
9
ConsolidatedSecond quarter revenue from Viking's
ongoing operations amounted to $81.4 million. Viking's ongoing operations
reported $80 million of operating expenses, resulting in a second quarter
operating profit of $1.4 million in the first full quarter since the unit's
restructuring as a regional carrier. In total, Viking reported operating losses
of $14.7 million in the second quarter of 1997 compared to $33.3 million for the
firstsame period last year.
Without Viking, second quarter were $712.7 million including the
restructuring charge previously discussed. Excluding this charge, operating expenses were $627.7$403.7 million in 1997
compared to $563.9$355 million last year,in the second quarter of 1996, an increase of $63.8 million or 11%13.7%.
This change resulted primarily from higher business volumes at RPS and
Logistics, which reported operating expense increases of 16%11.7% and 37%33.3%,
respectively.
ConsolidatedExcluding the restructuring charge and related transition costs, operating
lossincome was $41.1 million for the quarter and $54.6 million for the first half,
compared to 1996 second quarter was $71.5 million, including
the restructuring charge for Viking; operating income was $13.5of $1.4 million excluding this charge. Viking's operating loss without this charge was $33.1
million as compared to $14.0 million experienced last year.
Excluding Viking,and first half
1996 operating income of $19.6 million.
Second quarter operating income without Viking was $46.6$39.7 million, an increase of
$14.4
million14.4% over $32.2$34.7 million last year. RPS reported a 15% rise in second quarter
operating income to $38.7$32.3 million from $27.7$28.2 million for the same period last
year. RPS's results
weresecond quarter margins increased from 9.3% in 1996 to 9.5% in 1997.
Roberts continues to maintain excellent margins, while Logistic's margins have
improved over 1996 for both the second quarter and first half.
For the first half, operating income was $86.3 million without Viking, a 29.2%
improvement compared to $66.8 million in the first half of 1996. Growth in first
half operating income was due primarily to RPS, where operating income rose 27%
from $55.9 million in 1996 to $71 million in 1997. First half margins at RPS
improved from 9.48% to 10.48%. RPS's first half operating income was positively
affectedimpacted by a $5.3 million one-time change in employee benefits. Excluding the impact of
the change in employee benefits, RPS's margins increasedfirst half margin was 9.7% compared to
9.8% from 9.6% in 1996 while continuing to be impacted by aggressive
discounting of rates and higher fixed costs from expansion. RPS invested
significantly in network infrastructure by opening 32 new terminals by mid-1996
to complete its expansion to 100% of the U. S. population and extend its
presence9.48% in the Overnight Ground(SM) segment. Roberts and Logistics experienced
slightly improved margins over last year.first half of 1996.
The change in other"other expense, net" of $1.1$1 million for the second quarter and $0.1
million for the first half consisted primarily of additional net interest
expense of $3.6$3.1 million (net of additional capitalized interest of $.8
million)for the quarter and $6.7 million for the first half over first quarter
1996 levels offset by a gain on the sale of investment of $5.3 million.$2.3 million for the
quarter and $7.6 million for the first half.
The consolidated income tax benefit rate was 27.3% for the first half. The
income tax benefitexpense rate related to ongoing operations was 31.3% of the loss before income39.5% for the first
quarter
1997. The income tax rate excluding the restructuring charge was approximately
46%. This rate exceededhalf. Both rates differed from the U.S. federal statutory rate due primarily to
state income taxes and non-deductible operating costs.
The net loss-9-
10
Net income from ongoing operations (net income excluding transition costs) for
the second quarter was $49.2$24.3 million or $1.25$0.62 per shareshare. Including the Viking
transition costs, the company's net income for the first quarter of 1997
aswas $13.6 million or
$0.34 per share, compared to net income of $9.6$220,000 or $0.01 per share for the
second quarter of 1996. Transition costs negatively impacted net income for the
quarter by $10.7 million or $.24$0.28 per share. Net income from ongoing operations
was positively affected by the gain on sale of investment of $1.8 million or
$0.05 per share.
Net income for the first half from ongoing operations was $31.5 million or $0.80
per share. Including the second quarter net transition costs of $10.7 million or
$0.28 per share last year. Theand the first quarter restructuring charge negatively impacted results byof $56.4 million or
$1.43 per share, whilenet loss for the one-time changefirst half was $35.6 million or $0.91 per
share compared to net income of $9.8 million or $0.25 per share in employee benefits and1996. First
half net income from ongoing operations was positively impacted by the gain on
the sale of investment amounted to $5.6of $4.6 million or $.14$0.12 and by the one-time after tax change
in RPS's employee benefits of $2.8 million or $0.07 per share.
NetFor the first half, net cash provided by operating activities of $38.4$126.2 million
was sufficient to fund net property additions of $23.2$28.9 million and dividends of
$7.0$14 million enabling the companyand to reduce outside borrowings. The company is a party to bank
credit facilities providing for up to $300 million of term loans and up to $25
million of borrowings under revolving credit. Both agreements are unsecured and
interest is based on variable rates. Outstanding bank borrowings, which are
classified as short-term debt on the accompanying balance sheet, amounted to
$215$115 million at the end of the firstsecond quarter with $110 million$210 available for future
borrowings subject to the limitations of the loan covenants. Outstanding bank
borrowings as of July 18, 1997 (the end of the seventh accounting period) have
been further reduced to $50 million as a result of the proceeds from the sale
of Viking's Southwestern Division and cash flows from operating activities. The
bank loan agreements contain covenants requiring the company to maintain a
minimum level of consolidated net worth and limiting, among other things, the
ratio of debt to earnings, the incurrence of secured debt and sales of certain
companyof the company's assets.
1997 capital expenditures are currently estimated to approximate $140$125 million,
of which 60% is expected to be for technology and highly automated freight handling equipment,
30% for real estate and 10% for revenue and support equipment. The company
anticipates that through available borrowingborrowings and cash flows from operations, it
will be able to fund the remaining short-term cash
-9-
10 requirements from the Viking
restructuring, of $57,900, capital expenditures during 1997 and provide adequate levels of
working capital and funds for the payment of dividends and interest. In March
1997, the Board of Directors reduced the regular quarterly dividend from $.18$0.18 per share
to $.10$0.10 per share payable August 1, 1997. The future amount of cash dividends
is subject to the discretion of the Board. Future dividend decisions will be
affected by a number of factors, including the company's future operating
results, financial conditions and other factors.
The foregoing contains forward-looking statements that are based on current
expectations and are subject to a number of risks and uncertainties. Actual
results could differ materially from current expectations due to a number of
factors, including general economic conditions; competitive initiatives and
pricing pressures; availability and cost of capital; shifts in market demand;
weather conditions; the performance and needs of industries serviced by the
company's businesses; actual future costs andincluding employee wages and benefits;
actual costs of continuing investments in technology; the timing and amount of
capital expenditures; and actual costs and effects of the restructuring of the
business served by Viking.
-10-
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PART II - OTHER INFORMATION
Item 5. Other Information4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------------------------------
At the annual meeting of shareholders on May 14, 1997, the following proposals
were voted upon:
Concerning Election of Directors
Nominees for Director Votes Cast For Votes Withheld
- --------------------- -------------- --------------
George B. Beitzel 34,458,582 1,186,568
Richard A. Chenoweth 34,509,199 1,135,951
Norman C. Harbert 34,525,173 1,119,977
Harry L. Kavetas 34,513,343 1,131,807
Charles R. Longsworth 34,479,279 1,165,871
G. James Roush 34,528,753 1,116,397
Daniel J. Sullivan 34,134,678 1,510,472
H. Mitchell Watson, Jr. 34,464,209 1,180,941
Concerning Ratification of the Designation of Independent Auditors
Votes Cast For: 35,142,050
Votes Cast Against: 309,157
Abstentions: 193,943
Broker Non-Votes: N/A
Item 6. Exhibits and Reports on Form 8-K
- ---------------------------------------------------------------------------------
(a) Exhibits
--------
(27)10.1 Trust Agreement between Caliber System, Inc. and Bank One Trust
Company, N.A., dated April 30, 1997
10.2 Rider No. 1 to Caliber System, Inc. Long-Term Stock Award
Incentive Plan effective January 2, 1996
-11-
12
10.3 Rider No. 2 to Caliber System, Inc. Long-Term Stock Award
Incentive Plan effective January 2, 1996
27 Financial Data Schedule
(b) Reports on Form 8-K Filed During the FirstSecond Quarter of 1997
---------------------------------------------------------------------------------------------------------------------
On January 24,April 21, 1997, a Current Report on Form 8-K was filed by the
registrant to report Year EndFirst Quarter results.
On February 13,April 30, 1997, a Current Report on Form 8-K was filed by the
registrant announcing thatto announce an agreement in principal to sell the Boardoperations
of Directors declared a quarterly
dividend. The registrant also announced the scheduling of the Annual
Meeting of Shareholders to be held onViking Freight, Inc.'s Southwestern Division.
On May 14, 1997.
On March 27,28, 1997, a Current Report on Form 8-K was filed by the
registrant announcingto announce the signing of a major restructuringdefinitive agreement to sell
the operations of Viking Freight, Inc.
-10-'s Southwestern Division.
-12-
1113
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
companyregistrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALIBER SYSTEM, INC.
------------------------------------
(Company)---------------------------
(Registrant)
Date: May 8,August 1, 1997 By [Louis J. Valerio]
------------- -------------------------------------------------- --------------------
Louis J. Valerio
Senior Vice President-Finance and
Chief Financial Officer
Date: May 8,August 1, 1997 By [Kathryn W. Dindo]
------------- --------------------------------------------------- --------------------
Kathryn W. Dindo
Vice President and Controller
-11--13-
14
EXHIBIT INDEX
10.1 Trust Agreement between Caliber System, Inc. and Bank One Trust Company,
N.A. dated April 30, 1997
10.2 Rider No. 1 to Caliber System, Inc. Long-Term Stock Award Incentive Plan
effective January 2, 1996 (filed as Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q dated March 23, 1996, and incorporated
herein by reference).
10.3 Rider No. 2 to Caliber System, Inc. Long-Term Stock Award Incentive Plan
effective January 2, 1996 (filed as Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q dated March 23, 1996, and incorporated
herein by reference).
27 Financial Data Schedule